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Tobias v. Nationstar Mortgage, LLC

United States District Court, M.D. North Carolina

January 2, 2018




         This matter is before the Court on a Partial Motion to Dismiss Complaint [Doc. #9] by Defendants Nationstar Mortgage LLC (“Nationstar”), U.S. Bank, as Trustee for Specialty Underwriting and Residential Finance Trust Series 2006-BC5 (“U.S. Bank”), and Mortgage Electronic Registration Systems, Inc. (“MERS”) (collectively “Defendants”). For the reasons explained below, Defendants' Motion is granted and claims three and four are dismissed.


         Plaintiffs Richard and Sharon Tobias obtained a mortgage loan for their residence at 493 Liberty Hill Church Road in Mount Gilead, North Carolina (“Subject Property”) on or about September 7, 2006, from Wilmington Finance, Inc. memorialized by a Deed of Trust. (Compl. ¶¶ 1, 12 [Doc. #5]; Ex. A to Compl. [Doc. #5-1].) The Deed of Trust was recorded in Montgomery County Recorder's Office. (Compl. ¶ 12.) In September 2012, the Tobiases entered into a loan modification agreement with Bank of America. (Id. ¶ 14; Ex. D[1] to Compl. [Doc. #5-4].) The following year, on September 3, 2013, an Assignment of the Deed of Trust (“Assignment”) was recorded in the Montgomery County Recorder's Office which “purports to convey the beneficial interest in the Deed of Trust from Wilmington Finance, Inc. to Nationstar Mortgage, LLC.” (Id. ¶ 15; Ex. C[2] to Compl. [Doc. #5-3].) According to the Tobiases, “the Assignment is fraudulent and/or forged as a ‘Robo-Signed' document that is a fraudulent/forged documents it is void ab initio [sic].” (Compl ¶ 15.) The Tobiases also allege that the Assignment is void ab initio “because it was transferred after its closing date of November 28, 2006” which they describe as being a part of a “securitized trust prospectus”. (Id. ¶ 33.)

         The Complaint then describes a series of communications between Non Profit Alliance of Consumer Advocates (“Non Profit Alliance”) and Nationstar between December 3, 2015, and April 15, 2016, during which time Non Profit Alliance assisted the Tobiases with a loan modification application to Nationstar. (Id. ¶¶ 16-20.) Ultimately, Nationstar “closed out” the loan modification application “due to the expired time to submit documents” and Non Profit Alliance's failure to submit “the lease agreements and rental receipts.” (Id. ¶¶ 19, 20.)


         The Tobiases have sued Nationstar and U.S. Bank alleging violations of 12 C.F.R. § 1024 (Claim 1) and 12 C.F.R. § 1024.41 (Claim 2) related to their loan modification application and have sued all Defendants seeking cancellation of written instruments (Claim 3) and alleging unfair and deceptive trade practices (Claim 4) related to the Assignment. Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, Defendants have moved to dismiss Claims 3 and 4 for lack of standing and, in the alternative for Claim 4, because the North Carolina Debt Collections Act serves as the exclusive remedy for debt collection actions alleging unfair and deceptive practices.

         To survive a Rule 12(b)(6) motion, the complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556); see also McCleary-Evans v. Md. Dep't of Transp., State Highway Admin., 780 F.3d 582, 585 (4th Cir. 2015) (noting that a complaint must “contain[] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face in the sense that the complaint's factual allegations must allow a court to draw the reasonable inference that the defendant is liable for the misconduct alleged”). When evaluating whether the complaint states a claim that is plausible on its face, the facts are construed in the light most favorable to the plaintiff and all reasonable inferences are drawn in its favor. U.S. ex rel. Oberg v. Pa. Higher Educ. Assistance Agency, 745 F.3d 131, 136 (4th Cir. 2014). Nevertheless, “labels and conclusions[, ]” “a formulaic recitation of the elements of a cause of action[, ]” and “naked assertions . . . without some further factual enhancement” are insufficient. Twombly, 550 U.S. at 557.


         In their third claim seeking cancellation of written instruments, the Tobiases challenge the Assignment and presumably a pooling and servicing agreement (“PSA”) they refer to as a “securitized trust prospectus”. (Compl. ¶¶ 15, 33 (“the Assignment . . . is void ab initio because it was transferred after its closing date . . . [and] PLAINTIFFS do not yet have possession of a copy of this securitized trust prospectus”).) They have “a reasonable apprehension that if these void ab initio written instruments are left outstanding, they may cause serious injury due to those documents being void or voidable” and “seek to cancel the . . . written instruments . . . due to their being fraudulently forged, notarized, and criminally recorded”. (Id. ¶¶ 35, 36.) In response, Defendants argue that the Assignment is between Bank of America, N.A.[3] and Nationstar, not the Tobiases. (Mem. of Law in Supp. of Defs.' Partial Mot. to Dismiss Compl. at 4-5 [Doc. #11].) The Tobiases neither allege to have been parties to the Assignment nor that the Assignment altered their rights or obligations under the Deed of Trust; therefore, according to Defendants, they lack standing to challenge the Assignment's validity. (Id.) Furthermore, the Tobiases have not alleged that they were a party to any PSA and, therefore, according to Defendants, similarly lack standing “to assert a violation of the securitized trust's pooling and servicing agreement.” (Id. at 5 (referring to the allegation of a “securitized trust” in paragraph 33 of the Complaint).)

         The Court agrees with Defendants that the Tobiases lack standing to challenge the Assignment and the PSA. “[S]tanding in federal court is a question of federal law”. Hollingsworth v. Perry, __U.S.__, 133 S.Ct. 2652, 2667 (2013). The United States Supreme Court has taught that “the irreducible constitutional minimum of standing contains three elements” - (1) an injury in fact, (2) a causal connection between the injury and the defendant's conduct, and (3) the likelihood that a favorable decision will redress the injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). “[W]here state-created interests are at issue, . . . federal courts look to state law to aid in the definition of the ‘injury' a plaintiff may assert to meet Article III requirements.” Higdon v. Lincoln Nat'l Ins. Co., No. ELH-13-2152, 2014 WL 6951290, at *7 (D. Md. Dec. 8, 2014) (applying Maryland law in analysis of standing because “Maryland law creates and defines the . . . asserted contract right”); see also Wolf v. Fed. Nat'l Mortg. Ass'n, 512 F. App'x 336, 342 (4th Cir. 2013) (unpublished) (applying Virginia law to determine standing to challenge an assignment of a promissory note); Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 118 (4th Cir. 2004) (“A litigant bringing a diversity action (or seeking removal on that basis) can have no greater ability to assert legal rights created under state law than it would have in the state forum.”).

         Under North Carolina law, only a party to a contract or an intended third-party beneficiary of the contract may bring a claim under the contract. Tasz, Inc. v. Indus. Thermo Polymers, Ltd., 80 F.Supp.3d 671, 681 (W.D. N.C. 2015) (citing Vogel v. Reed Supply Co., 177 S.E.2d 273, 279 ( N.C. 1970)); Holshouser v. Shaner Hotel Grp. Props. One Ltd. P'ship, 518 S.E.2d 17, 24-25 ( N.C. Ct. App. 1999). The Tobiases have not alleged that they were parties to or intended third-party beneficiaries of the Assignment or PSA, nor does the language of the Assignment suggest they were.

         “Hence the only circumstances under which [the Tobiases] would have standing to challenge [the] [A]ssignment[] would be upon a showing of prejudice, i.e. that [they] face[] the potential for double liability if the [A]ssignment stands.” In re Sprouse, Bankr. No. 09-31054, 2014 WL 948490, at *2 (Bankr. W.D. N.C. Mar. 11, 2014). There are no allegations that the Assignment or the PSA subjected the Tobiases to double liability or similar prejudice. The allegations that Nationstar closed out their loan modification application do not plausibly allege prejudice relating to the Assignment or the PSA. (See Compl. ¶¶ 16-20.) Furthermore, the allegations (in support of their fourth claim for unfair and deceptive trade practices) that the marketability of the Subject Property has been harmed by a cloud on title are conclusory and unsupported by any other allegations in the Complaint. (See Id. ¶ 41.)

         Courts facing similar challenges by debtors, although often after a foreclosure, have consistently found the debtors lack standing. See, e.g., Davis v. BSI Fin. Servs., Inc., 633 F. App'x 837, 838 (4th Cir. Feb. 29, 2016) (unpublished) (affirming plaintiff's lack of standing to challenge the purportedly “robo-signed” note because, “[r]egardless of the truth of this assertion, Davis was not a party to the assignment and fails to demonstrate either that he has standing to challenge the assignment or that robo-signing renders the assignment void”); Wolf, 512 F. App'x at 342 (affirming plaintiff's lack of standing to challenge the validity of the assignment because she did “not allege that she is a party to the assignment . . . or that she is an intended beneficiary of the assignment” and explaining further that “the assignment does not affect Wolf's rights or duties at all [because she] still has the obligation under the note to make payments[;] [i]n fact, the only thing the assignment affects is to whom Wolf makes the payments”); Grenadier v. BWW Law Grp., No. 1:14CV827, 2015 WL 417839, at *4-5 (E.D. Va. Jan. 30, 2105) (finding that the plaintiff lacked standing to challenge the validity of the assignments and the securitization process because she did not allege any facts showing that she was a party or intended third-party beneficiary of any of the assignments); In re Sprouse, 2014 WL 948490, at *2 (describing “ample authority” in support of the finding that the plaintiff, a stranger to the assignments who failed to allege or show exposure to double liability, lacked standing to challenge the assignments as void); McGee v. Countrywide Bank FSB, No. 1:12CV772, 2013 WL 942394, at *3 (M.D. N.C. Mar. 11, 2013), adopted, (Apr. 25, 2013) (“[A] judicial consensus has developed holding that a borrower lacks standing to (1) challenge the validity of a mortgage securitization or (2) request a judicial determination that a loan assignment is invalid due to noncompliance with a [PSA], when the borrower is neither a party to nor a third party beneficiary of the [PSA]) (quoting In re Walker, 466 B.R. 271, 285 (Bankr. E.D. Pa. 2012)); Ward v. Sec. Atl. Mortg. Elec. Registration Sys., Inc.,858 F.Supp.2d 561, ...

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